Sterling off 4-week low after report Ireland will back PM May's Brexit plans

LONDON, Oct 4 (Reuters) - The British pound rose on Thursday, bouncing off four-week lows, after a media report that Ireland is backing Prime Minister Theresa May’s plan for an all-UK customs union with the European Union.

Backing from Dublin could help Britain towards overcoming one of the thorniest issues in the Brexit negotiations, a “backstop” deal on the border between Northern Ireland, part of the United Kingdom, and EU-member state Ireland.

Ahead of an EU summit this month, Ireland is prepared to back one of May’s proposals if no other solution to the Irish border issue is found - the whole of the UK to operate within a customs union with the EU, the Financial Times reported.

“The pound has not weakened as feared during the week of the Conservative Party conference. In fact, it has been overshadowed by a report from the FT which suggests that Ireland is backing PM May’s emerging plan for an all-UK customs union with the EU,” MUFG analysts said in a note.

“The EU would have to provide some encouragement as well that it is warming to the idea for the pound to stage a rally in the coming weeks.”

May’s conference speech on Wednesday, in which she stuck to her script on Brexit and expressed confidence Britain would get a deal to avoid a sudden and disorderly exit from the EU next March, lacked anything new to shift market sentiment and the pound was little moved.

After hitting as low as $1.2922 overnight - its weakest since Sept. 10 - on the back of a surging dollar, sterling recovered to $1.2967, up 0.2 percent on the day.

Britain’s currency also gained versus the euro, and was up 0.2 percent at 88.61 pence.

In her speech, May appealed to her party to unite behind her plan to leave the EU, warning critics their arguments could put Brexit in jeopardy.

May’s officials are planning to rush her Brexit deal through Parliament to stave off a rebellion from her own party, Bloomberg reported on Thursday.

“Somehow everything seems to be rather deadlocked at the moment, and as a result the downside risks for sterling remain in place,” Commerzbank analysts said in a note to clients. (Reporting by Tommy Wilkes; Editing by Toby Chopra)